EXHIBIT 10.7
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT"), dated as of March 1,
2005 is among GALAXY ENERGY CORPORATION, a Colorado corporation ("BORROWER"),
DOLPHIN ENERGY CORPORATION, a Nevada corporation, and PANNONIAN ENERGY, LTD., a
Colorado corporation (each such corporation, including Borrower, and together
with each other Person who becomes a party to this Agreement each an "OBLIGOR"
and, together, "OBLIGORS"), _______________, a _______________ ("SUBORDINATED
CREDITOR"), and HFTP INVESTMENT L.L.C, GAIA OFFSHORE MASTER FUND, LTD., CAERUS
FUND LTD, AG DOMESTIC CONVERTIBLES, L.P, AG OFFSHORE CONVERTIBLES, LTD.,
(collectively, and together with any transferees or holders from time to time of
the Notes (as defined below), hereinafter, the "LENDERS"), and PROMETHEAN ASSET
MANAGEMENT L.L.C., a Delaware limited liability company, in its capacity as
collateral agent for itself and for the Lenders (including any successor agent,
hereinafter, the "AGENT").
R E C I T A L S
A. Borrower has executed and delivered to each of the Lenders those
certain senior secured convertible notes each made by Borrower and dated as of
August 19, 2004 and October 27, 2004 (as the same may be amended, restated,
supplemented or modified and in effect from time to time, individually a "NOTE"
and collectively the "NOTES"). The Notes were issued pursuant to a certain
Securities Purchase Agreement dated as of August 19, 2004 (as the same has been
and hereafter may be amended, modified, supplemented or restated, the "PURCHASE
AGREEMENT") by and among, inter alia, Borrower and the Lenders, and pursuant to
which the Lenders have made certain loans ("LOANS") to Borrower.
B. DOLPHIN ENERGY CORPORATION, a Nevada corporation, and PANNONIAN
ENERGY, LTD, a Colorado corporation (each such entity, together with each other
person or entity who becomes a party to the Guaranty (as defined herein) by
execution of a joinder in the form of EXHIBIT A attached thereto, is referred to
individually as a "GUARANTOR" and collectively as the "GUARANTORS") have
executed a Guaranty dated as of August 19, 2004 (the "GUARANTY") in favor of the
Agent in respect of Borrower's obligations under the Purchase Agreement and the
Notes.
C. Borrower, ____________________, _______________________,
(collectively, the "SUBORDINATED OBLIGORS") and Subordinated Creditor have
entered into a ______________ Agreement [of even date herewith] (as the same may
be amended, supplemented, restated or otherwise modified from time to time as
permitted hereunder, the "SUBORDINATED PURCHASE AGREEMENT") pursuant to which,
among other things, Subordinated Creditor has extended credit to the
Subordinated Obligors as evidenced by a Subordinated Note [of even date
herewith] by each Subordinated Obligor in favor of Subordinated Creditor in the
aggregate original principal amount of $_________ (as the same may be amended,
supplemented, restated or otherwise modified from time to time as permitted
hereunder and including any notes issued in exchange or substitution therefor,
collectively, the "SUBORDINATED NOTE" and, if subdivided into two or more notes,
the "SUBORDINATED NOTES"), and pursuant to
which Obligors have incurred and may hereafter incur other obligations and
liabilities to Subordinated Creditor.
D. The Subordinated Obligors are not permitted to execute the
Subordinated Purchase Agreement, the Subordinated Notes or any other
Subordinated Indebtedness Documents (as defined herein) except to the extent
that such Subordinated Obligors, Subordinated Creditor and Agent execute and
deliver this Agreement.
NOW, THEREFORE, in reliance upon this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms used but not elsewhere defined in
this Agreement shall have the respective meanings ascribed to such terms in
the Purchase Agreement and the Notes. The following terms shall have the
following meanings in this Agreement:
ENFORCEMENT ACTION is defined in subsection 2.7.
LENDER OR LENDERS shall mean any holder of Senior Indebtedness
including, without limitation, any holder of any Senior Indebtedness after
the consummation of any Permitted Refinancing.
LOAN DOCUMENTS means the collective reference to the Purchase Agreement
and the Notes, the Warrants, the Security Agreement, the Account Control
Agreement, the Guaranty, the Pledge Agreement, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions and each of the
other agreements to which any Obligor is a party or is bound in connection
with the transactions contemplated under the Purchase Agreement and the
Notes.
PAID IN FULL or PAYMENT IN FULL shall mean the indefeasible payment in
full in cash of all Senior Indebtedness and termination of all commitments
to lend under the Loan Documents and Permitted Refinancing Loan Documents.
PERMITTED REFINANCING means any refinancing of the Senior Indebtedness.
PERMITTED REFINANCING LOAN DOCUMENTS means any and all agreements,
documents and instruments executed in connection with a Permitted
Refinancing of Senior Indebtedness.
PROCEEDING is defined in subsection 2.3.
SENIOR INDEBTEDNESS shall mean the obligations, liabilities and other
amounts owed under the Purchase Agreement, the Notes or any other Loan
Document including all interest, fees, expenses, indemnities and
enforcements costs, whether before or after the commencement of a
Proceeding and without regard to whether or not an allowed claim, and all
obligations and liabilities incurred with respect to Permitted
Refinancings, together with any amendments, restatements, modifications,
renewals or extensions of any thereof.
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SUBORDINATED CREDITOR shall mean each "Subordinated Creditor" which is
signatory to this Agreement and any other holders of the Subordinated
Note(s) or any other Subordinated Indebtedness from time to time as
permitted hereunder.
SUBORDINATED DEFAULT shall mean a default in the payment of the
Subordinated Indebtedness, or performance of any term, covenant or
condition contained in the Subordinated Indebtedness Documents or the
occurrence of any event or condition, which default, event or condition
permits Subordinated Creditor to accelerate or demand payment of all or any
portion of the Subordinated Indebtedness.
SUBORDINATED DEFAULT NOTICE shall mean a written notice to Agent
pursuant to which Agent is notified of the existence of a Subordinated
Default, which notice incorporates a reasonably detailed description of
such Subordinated Default.
SUBORDINATED INDEBTEDNESS shall mean all of the obligations of Obligors
to Subordinated Creditors evidenced by the Subordinated Purchase Agreement,
Subordinated Note(s) and all other amounts now or hereafter owed by
Obligors to Subordinated Creditors pursuant to the Subordinated
Indebtedness Documents.
SUBORDINATED INDEBTEDNESS DOCUMENTS shall mean the Subordinated
Note(s), Subordinated Purchase Agreement, [Warrant Agreement dated
__________, any guaranty with respect to the Subordinated Indebtedness]
[LIST OUT OTHER SUB-DEBT DOCUMENTS] and all other documents and instruments
evidencing or pertaining to any portion of the Subordinated Indebtedness,
as amended, supplemented, restated or otherwise modified from time to time
as permitted hereunder.
2. SUBORDINATION OF SUBORDINATED INDEBTEDNESS TO SENIOR INDEBTEDNESS.
2.1 SUBORDINATION. The payment of any and all of the Subordinated
Indebtedness hereby expressly is subordinated, to the extent and in the
manner set forth herein, to the Payment in Full of the Senior Indebtedness.
Each holder of Senior Indebtedness, whether now outstanding or hereafter
arising, shall be deemed to have acquired Senior Indebtedness in reliance
upon the provisions contained herein.
2.2 RESTRICTION ON PAYMENTS. Notwithstanding any provision of the
Subordinated Indebtedness Documents to the contrary and in addition to any
other limitations set forth herein or therein, no payment (whether made in
cash, securities or other property or by set-off) of principal, interest or
any other amount due with respect to the Subordinated Indebtedness shall be
made or received, and no Subordinated Creditor shall exercise any right of
set-off or recoupment with respect to any Subordinated Indebtedness, until
all of the Senior Indebtedness is Paid in Full PROVIDED HOWEVER, subject to
any adjustments or rights set forth in the Notes or any warrant,
Subordinated Obligors shall be permitted to make interest payments by means
of the issuance to the Subordinated Creditor of common stock of the
Borrower.
2.3 PROCEEDINGS. In the event of any insolvency, bankruptcy,
receivership, custodianship, liquidation, reorganization, assignment for
the benefit of creditors or other
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proceeding for the liquidation, dissolution or other winding up of any
Obligor or any of its Subsidiaries or any of their respective properties
(a "PROCEEDING"):
(i) the Lenders shall be entitled to receive payment in full in
cash of the Senior Indebtedness before the Subordinated Creditor
is entitled to receive any payment upon the Subordinated
Indebtedness, and Lenders shall be entitled to receive for
application in payment such Senior Indebtedness any payment or
distribution of any kind or character, whether in cash, property
or securities or by set-off or otherwise, which may be payable or
deliverable in any such Proceedings in respect of the
Subordinated Indebtedness;
(ii) any payment or distribution of assets of any Obligor of any
kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Subordinated Creditor would be
entitled pursuant to the Subordinated Indebtedness but for the
provisions hereof shall be paid by the liquidating trustee or
agent or other Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the Lenders until the Senior
Indebtedness shall have been Paid in Full, and Subordinated
Creditor acknowledges and agrees that such payment or
distribution may, particularly with respect to interest on Senior
Indebtedness after the commencement of a Proceeding, result in
the Subordinated Creditor receiving less than it would otherwise
receive;
(iii) the Subordinated Creditor hereby irrevocably (x)
authorizes, empowers and directs all receivers, trustees, debtors
in possession, liquidators, custodians, conservators and others
having authority in the premises to effect all such payments and
deliveries, and the Subordinated Creditor also irrevocably
authorizes, empowers and directs, the Agent and the Lenders until
the Senior Indebtedness shall have been Paid in Full, to demand,
xxx for, collect and receive every such payment or distribution,
and (y) agrees to execute and deliver to the Agent and the
Lenders all such further instruments confirming the authorization
referred to in the foregoing clause (x); and
(iv) Subordinated Creditor hereby irrevocably authorizes,
empowers and appoints Agent and the Lenders (until the Senior
Indebtedness shall have been Paid in Full) as its agent and
attorney in fact to (x) execute, verify, deliver and file such
proofs of claim upon the failure of the Subordinated Creditor
promptly to do so (and in any event prior to thirty (30) days
before the expiration of the time to file any proof) and (y) vote
such claims in any such Proceeding; provided that no holder of
Senior Indebtedness shall have any obligation to execute, verify,
deliver and/or file any such proof of claim or vote such claim.
In the event the Agent or any Lender (or any agent, designee or
nominee thereof) votes any claim in
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accordance with the authority granted hereby, the Subordinated
Creditor shall not be entitled to change or withdraw such vote.
The Senior Indebtedness shall continue to be treated as Senior
Indebtedness and the provisions hereof shall continue to govern the
relative rights and priorities of Lenders and the Subordinated Creditor
even if all or part of the Senior Indebtedness or the security
interests securing the Senior Indebtedness are subordinated, set aside,
avoided or disallowed in connection with any such Proceeding and the
provisions hereof shall be reinstated if at any time any payment of any
of the Senior Indebtedness is rescinded or must otherwise be returned
by Agent, any Lender or any agent, designee or nominee of such holder.
2.4 INCORRECT PAYMENTS. If any payment (whether made in cash,
securities or other property) not permitted under this Agreement is
received by any Subordinated Creditor on account of the Subordinated
Indebtedness before all Senior Indebtedness is Paid in Full, such payment
shall not be commingled with any asset of such Subordinated Creditor, shall
be held in trust by such Subordinated Creditor for the benefit of the
Lenders and shall promptly be paid over to the Lenders, or their respective
designated representatives, for application (in accordance with the
Purchase Agreement, the Notes or the Permitted Refinancing Loan Documents)
to the payment of the Senior Indebtedness then remaining unpaid, until all
of the Senior Indebtedness is Paid in Full.
2.5 SALE, TRANSFER. No Subordinated Creditor shall sell, assign,
dispose of or otherwise transfer all or any portion of the Subordinated
Indebtedness (a) without giving prior written notice of such action to
Agent, (b) unless prior to the consummation of any such action, the
transferee thereof shall execute and deliver to Agent and the Lenders a
joinder to this Agreement, or an agreement substantially identical to this
Agreement and acceptable to the Lenders, in either case providing for the
continued subordination and forbearance of the Subordinated Indebtedness to
the Senior Indebtedness as provided herein and for the continued
effectiveness of all of the rights of Agent and Lenders arising under this
Agreement and (c) unless following such sale, assignment, pledge,
disposition or other transfer, there shall either be (i) no more than two
holders of Subordinated Indebtedness or (ii) one Person acting as agent for
all holders of the Subordinated Indebtedness pursuant to documentation
reasonably satisfactory to Agent such that any notices and communications
to be delivered to Subordinated Creditors hereunder and any consents
required by Subordinated Creditors shall be made to or obtained from such
agent and shall be binding on each Subordinated Creditor as if directly
obtained from such Subordinated Creditor. In the event of a permitted sale,
assignment, disposition or other transfer, the Subordinated Creditor
engaging in such sale, assignment, disposition or other transfer, prior to
the consummation of any such action, shall cause the transferee thereof to
execute and deliver to Agent and the Lenders a joinder to this Agreement,
or an agreement substantially identical to this Agreement and acceptable to
the Lenders, in either case providing for the continued subordination and
forbearance of the Subordinated Indebtedness to the Senior Indebtedness as
provided herein and for the continued effectiveness of all of the rights of
Lenders and Agent arising under this Agreement. Notwithstanding the failure
to execute or deliver any such agreement, the subordination effected hereby
shall survive any sale, assignment,
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disposition or other transfer of all or any portion of the Subordinated
Indebtedness, and the terms of this Agreement shall be binding upon the
successors and assigns of each Subordinated Creditor, as provided in
Section 10 below.
2.6 LEGENDS. Until the Senior Indebtedness is Paid in Full, each of the
Subordinated Indebtedness Documents at all times shall contain in a
conspicuous manner the following legend:
"This Note [or other Subordinated Indebtedness Document] and
the indebtedness evidenced hereby are subordinate in the
manner and to the extent set forth in that certain
Subordination Agreement (the "Subordination Agreement") dated
as of _____ __, 200__ among ________________, ______________
and Promethean Asset Management L.L.C, to the Senior
Indebtedness (as defined in the Subordination Agreement); and
each holder of this Note [or other Subordinated Indebtedness
Document], by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement."
2.7 RESTRICTION ON ACTION BY SUBORDINATED CREDITORS.
(a) Until the Senior Indebtedness is Paid in Full and
notwithstanding anything contained in the Subordinated Indebtedness
Documents, the Purchase Agreement, the other Loan Documents or the
Permitted Refinancing Loan Documents to the contrary, no Subordinated
Creditor shall, without the prior written consent of Agent, agree to any
amendment, modification or supplement to the Subordinated Indebtedness
Documents , the effect of which is to (i) increase the maximum principal
amount of the Subordinated Indebtedness or rate of interest (or cash pay
rate of interest) on any of the Subordinated Indebtedness, (ii) shorten the
dates upon which payments of principal or interest on the Subordinated
Indebtedness are due, (iii) change in a manner adverse to any Obligor or
add any event of default or add or make more restrictive any covenant with
respect to the Subordinated Indebtedness, (iv) change the redemption,
prepayment or put provisions of the Subordinated Indebtedness, (v) alter
the subordination provisions with respect to the Subordinated Indebtedness,
including, without limitation, subordinating the Subordinated Indebtedness
to any other debt, (vi) shorten the maturity date of any of the
Subordinated Indebtedness or otherwise alter the repayment terms of the
Subordinated Indebtedness in a manner adverse to any Obligor, (vii) take
any liens in any assets of any Obligor or any of its Subsidiaries or any
other assets securing the Senior Indebtedness or (viii) obtain any
guaranties or credit support from any Person other than the Obligors or
(ix) change or amend any other term of the Subordinated Indebtedness
Documents if such change or amendment would increase the obligations of any
Obligor or confer additional material rights on any Subordinated Creditor
or any other holder of the Subordinated Indebtedness in a manner adverse to
any Obligor, Agent or Lenders.
(b) Until the Senior Indebtedness is Paid in Full, no
Subordinated Creditor shall, without the prior written consent of Agent,
take or continue any action, or exercise any rights, remedies or powers in
respect of any of the Subordinated Notes, the
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Subordinated Purchase Agreement or any other Subordinated Indebtedness, or
exercise or continue to exercise any other right or remedy at law or in
equity that Subordinated Creditor might otherwise possess, to collect any
amount due and payable in respect of any Subordinated Note or any of the
other Subordinated Indebtedness, including, without limitation, the
acceleration of the Subordinated Indebtedness, the commencement of any
action to enforce payment or foreclosure on any lien or security interest,
the filing of any petition in bankruptcy or the taking advantage of any
other insolvency law of any jurisdiction (any of the foregoing, an
"ENFORCEMENT Action"). If any Subordinated Creditor shall attempt to take
any Enforcement Action or otherwise seek to collect or realize upon any of
the Subordinated Indebtedness in violation of the terms hereof, the holders
of the Senior Indebtedness may, by virtue of the terms hereof, restrain any
such Enforcement Action or other action, either in its own name or in the
name of the applicable Obligor.
(c) Until the Senior Indebtedness is Paid in Full, any Liens of
Subordinated Creditors in the Collateral which may exist in breach of each
Subordinated Creditor's agreement pursuant to subsection 2.7(a)(vii) or
Section 18 of this Agreement shall be and hereby are subordinated for all
purposes and in all respects to the Liens of Agent and Lenders in the
Collateral, regardless of the time, manner or order of perfection of any
such Liens. In the event that any Subordinated Creditor obtains any Liens
in the Collateral in violation of subsection 2.7(a)(vii) or Section 18 of
this Agreement, Subordinated Creditors (i) shall (or shall cause their
agent) to promptly execute and deliver to Agent such termination statements
and releases as Agent shall request to effect the release of the Liens of
such Subordinated Creditor in such Collateral and (ii) shall be deemed to
have authorized Agent to file any and all termination statements required
by Agent in respect of such Liens. In furtherance of the foregoing, each
Subordinated Creditor hereby irrevocably appoints Agent its
attorney-in-fact, with full authority in the place and stead of such
Subordinated Creditor and in the name of such Subordinated Creditor or
otherwise, to execute and deliver any document or instrument which such
Subordinated Creditor may be required to deliver pursuant to this
subsection 2.7(c).
3. CONTINUED EFFECTIVENESS OF THIS AGREEMENT; MODIFICATIONS TO SENIOR
INDEBTEDNESS. (a) The terms of this Agreement, the subordination effected
hereby, and the rights and the obligations of Subordinated Creditors, Agent and
Lenders arising hereunder, shall not be affected, modified or impaired in any
manner or to any extent by: (i) any amendment or modification of or supplement
to the Purchase Agreement, any other Loan Document or any Permitted Refinancing
Loan Document or any Subordinated Indebtedness Document; (ii) the validity or
enforceability of any of such documents; or (iii) any exercise or non-exercise
of any right, power or remedy under or in respect of the Senior Indebtedness or
the Subordinated Indebtedness or any of the instruments or documents referred to
in clause (i) above.
(b) Agent and Lenders may at any time and from time to time in their sole
discretion, renew, amend, refinance, extend or otherwise modify the terms and
provisions of Senior Indebtedness (including, without limitation, the terms and
provisions relating to the principal amount outstanding thereunder, the rate of
interest thereof, the payment terms thereof and the provisions thereof regarding
default or any other matter) or exercise (or refrain from exercising) any of
their rights under the Loan Documents, all without notice to or consent from the
Subordinated
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Creditor and without incurring liability to any Subordinated Creditor and
without impairing or releasing the obligations of any Subordinated Creditor
under this Agreement. No compromise, alteration, amendment, renewal,
restatement, refinancing or other change of, or waiver, consent or other
action in respect of any liability or obligation under or in respect of,
any terms, covenants or conditions of Senior Indebtedness or the Loan
Documents, whether or not in accordance with the provisions of the Senior
Indebtedness, shall in any way alter or affect any of the subordination
provisions hereof.
4. REPRESENTATIONS AND WARRANTIES.
(A) Each Subordinated Creditor hereby represents and warrants
(as to itself and not as to any other Subordinated Creditor) to Agent
and Lenders as follows:
4.1 EXISTENCE AND POWER. Such Subordinated Creditor is duly
organized, validly existing and in good standing under the laws of the
state of its organization.
4.2 AUTHORITY. Such Subordinated Creditor has full power and
authority to enter into, execute, deliver and carry out the terms of
this Agreement and to incur the obligations provided for herein, all of
which have been duly authorized by all proper and necessary action and
are not prohibited by the organizational documents of such Subordinated
Creditor.
4.3 BINDING AGREEMENTS. This Agreement, when executed and
delivered, will constitute the valid and legally binding obligation of
such Subordinated Creditor enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by equitable principles.
4.4 CONFLICTING AGREEMENTS; LITIGATION. No provisions of any
mortgage, indenture, contract, agreement, statute, rule, regulation,
judgment, decree or order binding on such Subordinated Creditor or
affecting the property of such Subordinated Creditor conflicts with, or
requires any consent which has not already been obtained under, or
would in any way prevent the execution, delivery or performance of the
terms of this Agreement. The execution, delivery and carrying out of
the terms of this Agreement will not constitute a default under, or
result in the creation or imposition of, or obligation to create, any
Lien upon the property of such Subordinated Creditor pursuant to the
terms of any such mortgage, indenture, contract or agreement. No
pending or, to the best of such Subordinated Creditor's knowledge,
threatened, litigation, arbitration or other proceedings if adversely
determined would in any way prevent the performance of the terms of
this Agreement.
4.5 NO DIVESTITURE. On the date hereof, the Subordinated Creditor
which is signatory hereto is the current owner and holder of its
Subordinated Note and all other Subordinated Indebtedness Documents.
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4.6 DEFAULT UNDER SUBORDINATED INDEBTEDNESS DOCUMENTS. On the
date hereof, no default exists under or with respect to the
Subordinated Note or any of the other Subordinated Indebtedness
Documents.
(B) Each Obligor hereby represents and warrants to Agent and
Lenders that the signatories to this Agreement under the heading "Subordinated
Creditor" constitute all of the holders of the Subordinated Notes and the other
Subordinated Indebtedness.
5. CUMULATIVE RIGHTS, NO WAIVERS. Each and every right, remedy and power
granted to Agent or Lenders hereunder shall be cumulative and in addition to any
other right, remedy or power specifically granted herein, in the Purchase
Agreement, the other Loan Documents or Permitted Refinancing Loan Documents or
now or hereafter existing in equity, at law, by virtue of statute or otherwise,
and may be exercised by Agent or Lenders, from time to time, concurrently or
independently and as often and in such order as Agent or Lenders may deem
expedient. Any failure or delay on the part of Agent or Lenders in exercising
any such right, remedy or power, or abandonment or discontinuance of steps to
enforce the same, shall not operate as a waiver thereof or affect Agent's or
Lenders' right thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not preclude any other or
further exercise thereof or the exercise of any other right, remedy or power,
and no such failure, delay, abandonment or single or partial exercise of Agent's
or Lenders' rights hereunder shall be deemed to establish a custom or course of
dealing or performance among the parties hereto.
6. MODIFICATION. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by Agent or any Subordinated Creditor
therefrom, shall not be effective in any event unless the same is in writing and
signed by Agent and the holders of at least 51% of the then outstanding
principal balance of the Subordinated Note(s), and then such modification,
waiver or consent shall be effective only in the specific instance and for the
specific instance and for the specific purpose given. Any notice to or demand on
any Subordinated Creditor in any event not specifically required of Agent
hereunder shall not entitle any Subordinated Creditor to any other or further
notice or demand in the same, similar or other circumstances unless specifically
required hereunder.
7. ADDITIONAL DOCUMENTS AND ACTIONS. Each Subordinated Creditor at any
time, and from time to time, after the execution and delivery of this Agreement,
upon the request of Agent and at the expense of Borrower, promptly will execute
and deliver such further documents and do such further acts and things as Agent
may request in order to effect fully the purposes of this Agreement.
8. NOTICES. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
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If to a Subordinated [LIST OUT SUBORDINATED CREDITORS]
Creditor:
---------------------------
---------------------------
Attention:
Telecopy:
with a copy to:
---------------------------
---------------------------
Attention:
Telecopy:
If to any Obligor:
---------------------------
---------------------------
Attention:
Telecopy:
with a copy to:
---------------------------
---------------------------
Attention:
Telecopy:
If to Agent: Promethean Asset Management L.L.C.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx Xxxx
Telecopy: (000) 000-0000
or, in the case of party named above, at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time,
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date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or deposit with a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
9. SEVERABILITY. In the event that any provision of this Agreement is
deemed to be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court or governmental authority, this
Agreement shall be construed as not containing such provision and the invalidity
of such provision shall not affect the validity of any other provisions hereof,
and any and all other provisions hereof which otherwise are lawful and valid
shall remain in full force and effect.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
the successors and assigns of Agent and Lenders and shall be binding upon the
successors and assigns of Subordinated Creditors and Obligors.
11. COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to each other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
12. DEFINES RIGHTS OF CREDITORS; SUBROGATION.
(a) The provisions of this Agreement are solely for the purpose
of defining the relative rights of Subordinated Creditors, Agent and
Lenders and shall not be deemed to create any rights or priorities in favor
of any other Person, including, without limitation, any Obligor.
(b) Subject to the Payment in Full of the Senior Indebtedness, in
the event and to the extent cash, property or securities otherwise payable
or deliverable to the holders of the Subordinated Indebtedness shall have
been applied pursuant to this Agreement to the payment of Senior
Indebtedness, then and in each such event, the holders of the Subordinated
Indebtedness shall be subrogated to the rights of each holder of Senior
Indebtedness to receive any further payment or distribution in respect of
or applicable to the Senior Indebtedness; and, for the purposes of such
subrogation, no payment or distribution to the holders of Senior
Indebtedness of any cash, property or securities to which any holder of
Subordinated Indebtedness would be entitled except for the provisions of
this Agreement shall, and no payment over pursuant to the provisions of
this Agreement to the holders of Senior Indebtedness by the holders of the
Subordinated Indebtedness shall, as between any Obligor, its creditors
other than the holders of Senior Indebtedness and the holders of
Subordinated Indebtedness, be deemed to be a payment by such Obligor to or
on account of Senior Indebtedness.
13. CONFLICT. In the event of any conflict between any term, covenant or
condition of this Agreement and any term, covenant or condition of any of the
Subordinated Indebtedness
11
Documents, the provisions of this Agreement shall control and govern. For
purposes of this Section 13, to the extent that any provisions of any of the
Subordinated Indebtedness Documents provide rights, remedies and benefits to
Agent or Lenders that exceed the rights, remedies and benefits provided to Agent
or Lenders under this Agreement, such provisions of the applicable Subordinated
Indebtedness Documents shall be deemed to supplement (and not to conflict with)
the provisions hereof.
14. STATEMENT OF INDEBTEDNESS TO SUBORDINATED CREDITORS. Borrower will
furnish to Agent upon demand, a statement of the indebtedness owing from
Obligors to Subordinated Creditors, and will give Agent access to the books of
Obligors in accordance with the Purchase Agreement so that Agent can make a full
examination of the status of such indebtedness.
15. HEADINGS. The paragraph headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
16. TERMINATION. This Agreement shall terminate upon the Payment in Full of
the Senior Indebtedness.
17. SUBORDINATED DEFAULT NOTICE. Subordinated Creditors and Borrower each
shall provide Agent with a Subordinated Default Notice upon the occurrence of
each Subordinated Default, and Subordinated Creditors shall notify Agent in the
event such Subordinated Default is cured or waived.
18. NO CONTEST OF SENIOR INDEBTEDNESS OR LIENS; NO SECURITY FOR
SUBORDINATED INDEBTEDNESS. Each Subordinated Creditor agrees that it will not,
and will not encourage any other Person to, at any time, contest the validity,
perfection, priority or enforceability of the Senior Indebtedness or Liens in
the Collateral granted to Agent and the Lenders pursuant to the Purchase
Agreement, the other Loan Documents or the Permitted Refinancing Loan Documents
or accept or take any collateral security for the Subordinated Indebtedness. In
furtherance of the foregoing, on the date hereof, each Subordinated Creditor
hereby represents and warrants that it has not taken or received a security
interest in, or lien upon, any asset of any Obligor, whether in respect of the
Subordinated Indebtedness or otherwise.
19. GOVERNING LAW, JURISDICTION WAIVER OF JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such
12
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
20. WAIVER OF CONSOLIDATION. Each Subordinated Creditor acknowledges and
agrees that (i) Obligors are each separate and distinct entities; and (ii) it
will not at any time insist upon, plead or seek advantage of any substantive
consolidation, piercing the corporate veil or any other order or judgment that
causes an effective combination of the assets and liabilities of Obligors in any
case or proceeding under Title 11 of the United States Code or other similar
proceeding.
[remainder of page intentionally left blank]
13
IN WITNESS WHEREOF, each Subordinated Creditor, each Obligor, Agent and
each Lender has caused this Agreement to be executed as of the date first above
written.
SUBORDINATED CREDITOR:
--------------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
OBLIGORS:
GALAXY ENERGY CORPORATION, a Colorado corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
DOLPHIN ENERGY CORPORATION, a Nevada corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PANNONIAN ENERGY, LTD., a Colorado corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
AGENT:
PROMETHEAN ASSET MANAGEMENT L.L.C. in its
capacity as agent for all Lenders
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
LENDERS:
HFTP INVESTMENT L.L.C.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
-----------------------------------------
Name:
Title:
GAIA OFFSHORE MASTER FUND, LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
-----------------------------------------
Name:
Title:
CAERUS FUND LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
-----------------------------------------
Name:
Title:
AG DOMESTIC CONVERTIBLES, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.
Managing Member of the General Partner
By:
---------------------------------------
Name: Xxx Xxxxxxxxxxx
Title: Chief Financial Officer
AG OFFSHORE CONVERTIBLES, LTD.
By: Xxxxxx, Xxxxxx & Co., L.P.
Director
By:
----------------------------------------
Name: Xxx Xxxxxxxxxxx
Title: Chief Financial Officer
